If you are considering buying your first home, you probably have several questions about the buying process. You've probably heard different things either from your peers, family or the internet as to what you need to do in order to purchase your first property. Just be careful, those close to you don't always have all the right answers!
Today, I want to clear up some of the home buying myths that I hear out on the streets. Here's my top 7 first time home buyer myths.
Myth #1: You need 20% down to buy a house
This is the most common thing I hear from people when we first chat. How crazy does this sound? Think about it. If a house is selling for $100,000, that would mean that you would need $20,000 down to purchase this property. How many first time home buyers have that kind of cash laying around? Not many. You can actually get an FHA loan for as little as 3.5% down if you prefer to go that route. Otherwise, some banks will allow you to do a conventional loan for around 5%-20%. You'll want to find a good lender who can guide you through which loan would work best for your scenario.
Myth #2: You don't need to use a real estate agent
If you know me, I'm all for a good ole classic DIY project. I love getting online and researching steps for everything. But, buying a house shouldn't be a DIY project. Remember, it's free for you as a buyer to use an agent when purchasing a house. Why would you want to risk this on your own? Chances are, the house you want to buy is probably listed with another agent. Wouldn't you want someone on your side who would represent you during the transaction and make sure everything is handled correctly?
A full time agent should save you a ton of time and headaches. They are equipped with the right tools to help your online searching, they know how to navigate through contracts, and also know a few tips that should help when writing the perfect offer for you.
Myth #3: All you need is your down payment to close
In a perfect world, you would only need to put down the minimum down payment to close. But that't not the world we live in. Here are some other costs that may come up along with your down payment:
Home inspection is normally paid upfront before the closing, that is if you have a home inspection.
Homeowners insurance is usually something that is required to be paid in full at the closing.
Your lender may require that the appraisal is paid before it can be ordered.
Closing costs on your loan
HOA fees. Depending on when you close, you will probably need to credit the current seller back some of the HOA fees.
Myth #4: You don't really need a home inspection
I am not sure where this one came from, but this myth needs to go away! If you fully understand how the offer process works, you have the option to have a home inspection. Without this home inspection, you are basically telling the seller you will take the house as-is.
If you wrote a fair offer for the home, wouldn't you want the seller to go back and make the safety repairs before you close? Also, when you have the inspection done, you will get this long report that you can keep forever.
All of the smaller things the inspector makes note of on the report can be your to-do list after the closing. Having an inspection is well worth the money spent!
Myth #5: You need to have squeaky clean credit to buy a house
Having a good credit score (anything above 700) will obviously give you an advantage when purchasing a house. It will help you get a better loan rate, etc. But that shouldn't derail you from your home ownership dreams.
There are some other factors your lender will look at when getting pre-approved for a loan. They will look at your time on job, any previous credit history with the lender, and also your debt to income ratio. If you can get past the fear of looking at your credit report, a good lender can pull that for you and let you know what areas you may need to improve on in order to obtain a home loan. With hard work and obedience, you can achieve this pre-approval!
Myth #6: The first step in the process is touring potential houses you want to buy.
There's nothing wrong with window shopping. My wife has mastered this art down when it comes to shopping for clothes. Gone for 6 hours and comes home with nothing! Sorry hunny, your secret's out. When you're looking for a house too soon, you will get heart broken. Let me explain why that is.
If you go looking before you have your ducks in a row, there is a good possibility that the house may already be pending or sold. You'll want to talk with an agent and set your criteria. You'll also want to get with a lender to see what you can afford. This will narrow down your search and speed the process up.
Obtaining a pre-approval from your lender usually comes before touring houses.
Myth #7: The seller probably won't accept your lower offer
Buying a house is all about negotiations. The list price is not set in stone. Your agent should be able to pull up recent data on the house to see what is a fair offer price would be.
Most of the time, you will see that a good property usually (keyword usually) will sell anywhere around 97-98% of their list price. Sometimes they sell for more, and sometimes for less. If it's the perfect home and worth the list price, it doesn't hurt to pay full price for the house you want if it's WORTH IT! But don't be scared to negotiate.
That's why you want a good Realtor on your side to guide you here. (See Myth #2)
There are many more home buyer myths out there, but these are some of the top ones I hear daily. Do you have any myths that you want revealed? Please feel free to share those with me.
I would be more than happy to be your home buyer myth buster!